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5G will push CSPs to accelerate and broaden their NFV/SDN-related initiatives

Mainstream adoption of NFV/SDN will coincide with 5G ramp

Leading communication service providers (CSPs) will accelerate and broaden their network transformations en route to deploying 5G and becoming digital service providers (DSPs). Softwarization, virtualization and cloudification are foundational aspects of a DSP’s network. These CSPs, which started their network virtualization journeys in the mid-2010s with virtual machines, are now transitioning to containers and ultimately to a cloud-native, microservices-based architecture.

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5G will push CSPs to accelerate and broaden their NFV/SDN-related initiatives

According to TBR’s 1Q19 NFV/SDN Telecom Market Landscape, leading operators will accelerate and broaden their network transformations en route to deploying 5G and becoming digital service providers (DSPs). Softwarization, virtualization and cloudification are foundational aspects of a DSP’s network.

5G is greatly enhanced when using virtualization, especially when enabling and maximizing the benefits of network slicing and achieving better radio access network (RAN) economics. Though most operators intend to initially deploy the non-stand-alone (NSA) standard of 5G, which tethers 5G radio with evolved packet core (EPC), an eventual upgrade to the stand-alone (SA) standard, which tethers 5G radio to a 5G core, will become a reality in the early 2020s.

5G core is inherently virtualized, and communication service providers (CSPs) will be keen to prepare their networks to maximize the benefits of utilizing a fully virtualized network architecture, which includes, but is not limited to, increasing agility, flexibility, visibility and cost efficiency.

In 2019 Rakuten will become the first fully virtualized DSP in the world. Should the company’s approach to network architecture work, it will legitimize and embolden other CSPs to double down on their network transformations and hasten their migration to white-box hardware and cloud-native architectures.

CSPs are under pressure to invest in NFV/SDN to reduce total capex and opex spend as well as introduce new services and stay competitive in the data-driven digital economy, which is increasingly dominated by webscale and over-the-top players. This pressure will prompt more CSPs to spend on NFV/SDN during the forecast period. TBR expects 27.5% of total CSP capex and external opex spend will be allocated to NFV/SDN by the end of 2022.

total global csp nfv/sdn spend

Cost of ‘intelligent connectivity’ must decline significantly for intelligent world to unfold

TBR perspective

Realizing the intelligent world presented by the mobile industry at Mobile World Congress Barcelona 2019 (MWC19) will require a fundamental change in how networks are architected, including a radical reduction in the cost of providing connectivity. It will also require business transformation for companies tied to the old world, namely communications service providers (CSPs) and their incumbent vendors.

It was readily apparent at the event that technology is advancing at a much faster pace than the establishment of business cases that economically justify deployment of the technology. The reality for the mobile industry is that the cost of building, owning and operating networks is too high and networks are too inflexible to support the business realities of the digital era, whereby connectivity is relegated to a commodity service and the value lies in the platforms and applications that run over the network. The industry has known this for years, but changes have been minimal, until maybe now.

The entrance of Rakuten to the mobile industry could be a game changer and provides a glimpse into what a digital service provider will look like. In what could arguably be the most important takeaway from the entire event, Rakuten’s approach to building and operating a network could signify a paradigm shift in the industry. Not only will Rakuten’s network be agile, flexible and dynamic to provide digital services, it will also enable a dramatic reduction in the cost of connectivity.

The theme of MWC19 was “intelligent connectivity” and centered on how 5G, IoT, AI and big data are coming together to enable the intelligent world. Against this backdrop, Rakuten stole the show with the evangelization of its end-to-end virtualized and cloud-native network, which is being deployed across Japan this year. Rakuten’s network provides a glimpse into what the intelligent network of the future will look like.

Ready when you are: Nokia prepared to migrate customers to 5G

TBR perspective

At Nokia’s (NYSE: NOK) 2018 Analyst Conference, held in Tokyo in August, the company emphasized that its end-to-end portfolio, supported by a robust R&D program, is ready and able to take its customers into the 5G era. The vendor also stressed that 5G is much more than just a radio upgrade and that realizing the full potential of 5G requires a fundamental change to the architecture of the network.

Given how much disruption is facing the telecom industry, it was refreshing to see that Nokia is being proactive in aligning with where the market is trying to go, even if that means disrupting itself. Though a part of the company will remain focused on servicing the legacy platforms of the past, the other part of the company will focus on realizing the future. Given that most operators are stuck in between both worlds as well, it is fitting that Nokia will be able to support the migrations of its customers toward the network of the future.

Event overview

Nokia hosted a select group of industry analysts in a two-part event. The first part of the event was a two-day workshop about the company’s global Fixed Networks business, and the second part of the event was a two-day Asia Pacific and Japan (APJ) regional update to deep dive on specific trends occurring in those markets.

In addition to the usual market overview, strategy and portfolio updates, Nokia hosted several customers at the event, namely Infracapital, KDDI, NTT DOCOMO, SoftBank and Marubeni, to discuss their own businesses and share how Nokia is helping them achieve their goals. A representative from Japan’s Ministry of Internal Affairs and Communications was also present to provide an overview of Japan’s telecom industry and how policy is shaping that country as it transitions into the 5G era.

Hosting the event in Japan was pertinent and timely given the country’s history as an early technology adopter and its upcoming adoption of 5G. With the 2020 Summer Olympics less than two years away, Japan will showcase for the world cutting-edge use cases of telecom networks leveraging 5G technology. The country also symbolizes the monumental changes occurring in the telecom industry, namely that domestic operators are challenged to evolve into digital service providers to better compete against digital-native competitors in their home market, such as Rakuten, as well as realize new business models from the 5G era to grow.